Meet Africa’s Newest Billionaire, Abdulsamad Rabiu

On a chilly autumn night in London, a chauffeured Bentley glides into the courtyard of an affluent home. Seconds later, atop the entrance steps, the doors swing open and out walks one of Africa’s richest men in a T-shirt, jeans and black overcoat. Hardly how one imagines the publicity-shy chairman and CEO of BUA Group, a privately-owned conglomerate with annual revenues estimated at $2 billion.

The look may be unpretentious. His ambitions are anything but, as revealed by his plans to invest more than $500 million in Nigeria’s economy over the next few years. This is Abdulsamad Rabiu, the unassuming Nigerian business tycoon, full of life, with a keen ear and a great business story.

FORBES AFRICA, working with FORBES magazine in the U.S., calculates that Rabiu’s stake in his commodities and cement empire, plus his real estate holdings in South Africa and London, are worth $1.2 billion, up from $670 million a year ago, primarily due to better information on Rabiu’s holdings and the revenue of his companies. He ranks 23rd on Forbes new 2013 list of Africa’s 50 Richest.

Born in Nigeria’s northwest state of Kano, Rabiu, age 53, is the son of well known businessman Isyaku Rabiu, who made a fortune in trade and industry in the decades after Nigeria’s independence from the UK in 1960. By the 1970s, Isyaku emerged as a key sponsor of the National Party of Nigeria, which became the ruling political party after the country returned to civilian rule following the elections of 1979. A military coup in 1983 toppled the government and led to the arrest of then-President Shehu Shagari and many of his close associates, including Isyaku.

Around this time, the younger Rabiu earned his bachelor’s degree in economics from Capital University in Columbus, Ohio. He returned home to find his father’s business in a precarious state following his incarceration. Barely 24 years old, with little business experience, Rabiu had to lead his father’s business empire during dark days.

“It was very difficult. When we started, our dad was not there. There was this huge vacuum because of his personality. He grew the business, he did everything, everybody reported to him, and then he wasn’t there anymore. So at a very tender age, I was saddled with so many things. I had to take a lot of important decisions, and don’t forget that this happened suddenly,” says Rabiu.

“At the time, there were three ships being discharged, rice and sugar ships. The government agencies tried to seize the goods, so we were discharging. They were taking. We were taking back. It was a big, big issue,” he continues. “The biggest challenge was that there were restrictions on confirming letters of credit because of the coup. Then there was the issue of the planes. There were two private jets and we didn’t know what to do with them. We couldn’t fly them. They actually grounded the jets. We were able to get the big one out and we decided we didn’t need it. I just got rid of it.”

In 1988, Rabiu set up his own business, BUA International, with the blessing of his father. He imported rice, sugar and edible oils, as well as iron and steel rods. His big break came in 1990 when a friend informed him of an opportunity with a government-owned steel company.

Production at the Delta Steel Company had been beggared by the Nigerian government’s decision to reduce grants. The company was considering approaching private business to finance the procurement of raw materials and Rabiu saw the promise. The deal needed approval from the government. After approaching the minister of steel, who hailed from Rabiu’s home state, he was asked to finance the project.

“We were able to get the business, which was worth almost $20 million at the time, but the idea was that we were importing their raw materials to the tune of 25,000 to 30,000 tons per month, and instead of them paying us back in cash, they gave us the processed products. We didn’t want to collect money because at the time you would sometimes never get it,” Rabiu explained.

The payment method was favorable for Rabiu and his company because the price of the products was government controlled. “I think it was around $6.30 from the company, but around $90 in the open market. So it was quite a good opportunity for us and we made quite a bit of money,” he recalled.

By 1992, a regime change came and the honeymoon was over. With the substantial profits he had made from the steel venture, Rabiu invested in Tropic Commercial Bank, which operated in Nigeria. He became the chairman of the bank after buying a majority shareholding.

In 1995, BUA acquired Nigeria Oil Mills, a peanut processing company in Kano, for more than $20 million. The previous owners had offered BUA the business based on its status as a player in the edible oils business. Two years later, BUA Flour Mills’ first factory was established in Lagos. The Kano flour factory was launched in 1998. Thereafter, BUA set up its sugar refinery in Lagos. The 2,000 million tons per day capacity plant is the second largest sugar refinery in West Africa, after the Dangote Sugar refinery, which produces an estimated 2,400 MT per day.

On a hot morning in Port Harcourt, on the coast of Nigeria, FORBES AFRICA visits one of Rabiu’s biggest projects, the BUA Mixed Development, which includes a sugar refinery with a production capacity of 2,000 tons per day and a 65,000MT storage; a flour mill; a pasta, semolina and rice mill. In the capital, Abuja, Rabiu’s BUA group has a huge housing project of 200 homes to be completed by early next year.

“He is very analytical, balanced and always calm under stressful situations. In spite of being experienced, he is always willing to learn more,” says Engr Olumo, BUA’s group project co-ordinator in the eastern region.

Rabiu has often been compared to Africa’s richest man, Aliko Dangote, due to the fact that most of their businesses operate in the same sectors. He dismisses talk of any competition with Dangote, pointing out that their mutual interests in certain sectors derive from the inclinations of the patriarchs of their families.

“We are both from Kano and our parents were doing more or less the same kind of business, so we grew up in the trading environment. My dad had been doing rice, sugar and edible oil for a very long time. Aliko’s granduncle, Sanusi Dantata, at one time was the biggest trader in terms of imports in Kano state,” he says. “We’ve known each other since childhood. Although people seem to think that we are doing the sort of business that Aliko is doing, I keep telling them that this is a business that my family has been involved in before Aliko even started.”

BUA’s sugar venture has been a cash cow. The company was able to reap huge margins due to the difference in duties for imports of raw sugar, which was 5%, and that of finished, or white, sugar, which is 50%. With the money he made from this business, the amount of which he declines to reveal, Rabiu cast his eye further.

His research revealed that the cement business would offer good returns on investment. The first step was to secure a license to import cement. The market for cement in the country was characterized by high price through scarcity, which was due to the fact that few companies held licences to import. Conditions for obtaining the license included that the interested company must have a terminal where the raw cement would be processed and bagged, as well as have a plant in Nigeria where production is taking place, or be in the process of building one.

BUA set out to meet the requirements, starting with the acquisition of the Cement Company of Northern Nigeria (CCNN) for nearly $100 million from Scancem International in 2007. The next goal was to procure the terminal. Since it would have taken over a year to build one, Rabiu made the smart move to acquire a floating terminal. He approached the then-President of Nigeria, Umaru Musa Yar’adua, to get the approval. The terminal secured the import license.

Production on this platform was carried out until last year, when the government restricted imports following the launch of Dangote’s $1 billion cement plant in Ibese, Nigeria. Although Rabiu disagrees with the government’s decision, he says he was prepared for it.

“We knew it was coming, so we decided to put up our own plant in Edo cement. Part of what we acquired from Scancem was a small grinding plant in Edo state, which is called Edo cement, but then with a large limestone deposit. The plant is being built as we speak and will be delivered next year. It is a 3-million ton plant and costs a little over $500 million. At the same time, we are also looking at Ilaro, west Nigeria.”

Rabiu says he planned to head to China for a meeting with CDMI, a Chinese cement plant manufacturer, to put up another plant in Ilaro. “We want to capture part of the south western market, because that is the biggest market in Nigeria today,” he explains, adding that Nigerian demand is greater than estimated. When additional supply is added and the price is adjusted further, he says, latent demand will be unlocked.

He ticks off the facts: Nigeria has around 170 million people. The country’s cement production capacity is 20-22 million tons. That’s 117 kilograms per head, which is low, he says. He is looking at a minimum of 250 kilograms per head in the next three to four years.

Then there are the prices being charged. “The price of cement in Nigeria is probably the highest anywhere in the world, apart from possibly Zambia, at $8.80 per bag, which is $173 per ton. It’s around $40 anywhere else in the world. Why should it be $170? It doesn’t make sense at all,” laments Rabiu.

“Everybody says we have issues with infrastructure and power; it’s nonsense. Power is cheap in Nigeria. Gas is cheap. We had to put up a power plant at Edo cement, which is about $60 to $70 million. Capital expenditure is there, and it’s quite a bit of money. But, it costs you no more than $20 million a year for gas and it is your biggest cost in a cement plant,” he says.

Rabiu wants to see the price of products decrease so that demand will increase. While cement has been a key focus of the group’s activities in recent years, Rabiu also has his eyes on the steel industry. Nigeria is the largest importer of steel and steel products in sub-Saharan Africa. The country does not have an integrated steel plant.

He is also making plans to invest more in expanding the sugar business to exploit opportunities that have been created by the federal government’s implementation of a national sugar master plan. “We want to ensure that we have at least 30,000 hectares cultivated for sugar plantation in the next three years. We have the Lafiaji sugar plantation, which we bought from the government around four years ago, but it is only around 15,000 hectares, so we are trying to develop another 30,000 hectares,” he says. His bet: that the demand for sugar will go up if the price comes down. And he thinks he can bring it down.

For a man who can easily afford the best in life—he has a Bentley and Aston Martin parked in his courtyard—Rabiu’s simplicity is remarkable. He speaks excitedly about going to see American jazz singer Stacey Kent play whenever she performs in London. The man is also a movie buff and is always on the lookout for blockbuster releases. With a whiff of triumph, he declares that he just saw the new biographical drama Diana, which captures the last two years of the life of the late Princess of Wales.

Besides his assets in the BUA Group, Rabiu owns property in Britain worth $62 million, and in South Africa, worth $19 million. Among his properties is a house in Gloucester Square in London worth nearly $16 million and a penthouse at The One & Only Hotel, in Cape Town, worth $12.6 million. Rabiu’s taste for good living is plain to see; he has bought homes from Eaton Square to Avenue Road, also known as Millionaires’ Row.

Rabiu jets around the world on an 8-seater Gulfstream G550 worth $44.9 million, powered by a Rolls-Royce BR710 turbofan engine, as well as an $18-million Legacy 600 aircraft.

Rabiu exudes an aura of a fulfilment. He gives the impression of one who values his achievements and success, but does not wear it on his sleeve. From being born with a silver spoon in his mouth, Rabiu—Africa’s newest billionaire—has carved out his own place in the continent’s business history.